POLITICS: THE ISSUES;White House Report Foresees A Sharp Decline in the Deficit

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The Clinton White House issued its midsummer revised economic forecast today, predicting that the Federal budget deficit this fiscal year would be $116.8 billion -- $29 billion less than the Administration forecast just this spring and only a third of its level when Mr. Clinton took office.

The White House used the good news to make good politics, sending out a bevy of senior officials to brag about it at a morning briefing where they attributed it to Mr. Clinton's 1993 deficit reduction package.

The White House also said that it expected the domestic economy to grow by 2.6 percent this year, up from its previous forecast of 2.2 percent growth and the 1.5 percent rise of 1995.

"The fact is, our economy is now the soundest it's been in a generation," Mr. Clinton said today in a speech to the National Governors' Association.

The President added that as a percentage of the economy, the deficit was at its lowest level since 1974: 1.6 percent of gross domestic product, by far the lowest current level for any of the world's leading industrialized nations.

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Senator Pete V. Domenici of New Mexico, chairman of the Senate Budget Committee, said that much of the decline was a result of nothing more than revisions in technical assumptions and economic forecasts.

"The Administration taking credit for it," Mr. Domenici said, "is like the rooster taking credit for the sunrise."

In fact, last summer Mr. Clinton decided to match the Republicans' goal of balancing the budget by just after the turn of the century, having previously resisted a specific deadline. Today the White House said the improved forecasts would actually produce a budget surplus of $25.8 billion in 2001 and $60.9 billion in 2002.

Indeed, the one potential dark lining for Mr. Clinton in this silver cloud is that the deficit has now shrunk so much that Republicans may be tempted to propose a larger tax cut than can be easily financed, and thus put him on the defensive as a dour-faced deficit hawk. But Republicans, too, are heavily invested in balancing the budget, and, compared with the alternatives, stolidity is a risk the Administration seems happy enough to take.

The new estimate, if realized, would mean a decline from an actual deficit of $164 billion for the 1995 budget year and would mark the fourth consecutive year of declining deficits.

The midsession review does forecast a slight increase in the deficit next year, to $125.7 billion. But the Administration projects steady declines after that, and a budget surplus five years from now. That would be the first time since 1969 that the Government had not run a deficit.

Residents of the Okimaw Ohci Healing Lodge in Maple Creek, Saskatchewan, the first Canadian penal institution designed specifically for Indian offenders, embrace after holding a "talking circle," at which they freely discuss what is on their minds.

A version of this article appears in print on July 17, 1996, on Page D00021 of the National edition with the headline: POLITICS: THE ISSUES;White House Report Foresees A Sharp Decline in the Deficit. Order Reprints|Today's Paper|Subscribe